What Are Assets Under Management (AUM)?

What Are Assets Under Management (AUM)?

Let me explain assets under management (AUM) directly: it's the total market value of the investments that a portfolio manager or investment company holds on behalf of clients. Think of it as the entire pool of money that's been invested.

For a mutual fund or exchange-traded fund (ETF), AUM is simply the total amount of money invested in that fund. If you're an individual investor, your personal AUM is just the amount you've put in.

When you're choosing an investment or a company to handle your money, you should consider AUM alongside other factors.

Key Takeaways

A fund or company's AUM changes constantly based on market conditions and the buying or selling by participants. You can see a large AUM as an indicator of stability and liquidity. With substantial AUM, it's easier to sell shares because the fund has plenty of liquidity.

Fund management fees and expenses are typically calculated as a percentage of your AUM as an investor.

Understanding Assets Under Management (AUM)

AUM is a key figure when you're looking at an investment fund, a family of funds, a venture capital firm, a brokerage, or an individual registered as an investment advisor or portfolio manager.

Different financial institutions calculate AUM in varying ways—some include bank deposits, mutual funds, and cash, while others stick to funds from individual investors under their discretionary management.

AUM covers the capital that the manager can use for transactions on behalf of one or all clients. You might need a minimum personal AUM to qualify for certain investments, like a hedge fund. Your AUM could also determine the services you get from a financial advisor or brokerage.

If you have $50,000 in a mutual fund, that counts toward the fund's total AUM. The fund manager can buy and sell shares without needing your special permission, as long as they follow the stated investment objectives.

It's important to note that investors often see a higher AUM as a positive sign of management quality.

Calculating AUM

The way companies calculate AUM varies, and it depends on the flow of investor money in and out of a fund. These numbers shift constantly with market ups and downs, plus deposits or withdrawals by investors.

Asset performance, capital appreciation, and reinvested dividends all increase a fund's AUM. It also grows when new customers come on board.

On the other hand, AUM decreases with market value losses, fund closures, or reduced investor inflows.

To calculate AUM, you aggregate the total market value of all assets an investment manager oversees for clients, including stocks, bonds, mutual funds, ETFs, cash equivalents, and other securities.

The process involves identifying and valuing each asset in client portfolios, considering current market prices, fair values, and any currency conversions. Once you have all those market values, add them up to get the AUM.

AUM and SEC Regulation

The U.S. Securities and Exchange Commission (SEC) requires most firms with AUM between $25 million and $110 million to register with them, depending on factors like the firm's size and location.

State securities regulators handle advisers with up to $100 million in AUM. If you're an adviser with AUM below $100 million, you register with the state where your principal business is located.

Once a state-registered adviser's AUM reaches $100 million, they can choose to register with the SEC. If it surpasses $110 million, SEC registration is usually mandatory.

AUM and Fees

AUM factors into fee calculations. Many investment products charge management fees as a fixed percentage of your AUM. Financial advisors and personal money managers do the same, basing fees on your personal assets under management.

Don't assume the relationship between AUM and fees is straightforward. You might think higher AUM means higher fees for managers, but fee structures vary widely across products and client types.

For instance, actively managed funds often charge more than passive ones due to the involved management and research. Larger institutional clients can negotiate lower fees because of their investment size and bargaining power. Firms might even lower fees to attract big investors. So, higher AUM doesn't always equal higher fees.

AUM and Investment Management Strategy

One core goal for an investment firm is to increase its AUM, which gives them more money to invest and greater leverage for growth.

Client acquisition strategies help grow AUM by targeting new clients that fit the manager's market and objectives.

Product differentiation is key too—developing new investment products that match market trends, investor needs, and regulations can bring in more capital.

Take State Street Corp.'s 2023 annual report, where they highlight 'State Street Alpha,' a platform for large-scale data interpretation. Products like this attract capital from new or existing customers.

AUM and Investor Psychology

Investor psychology affects AUM growth. In optimistic times, you might see investors putting more capital into funds, boosting AUM. During pessimistic periods, withdrawals or shifts to safe assets can cause declines.

Behavioral biases like herd behavior come into play. New investors often pick ETFs or companies with the highest AUM, which can create a cycle where people follow the crowd instead of researching carefully.

Example of AUM

Consider the SPDR S&P 500 ETF (SPY), which holds shares in all S&P 500 Index companies. As of April 24, 2025, its AUM was over $572 billion.

State Street Corp., the managing firm, oversees more than 200 mutual funds and ETFs besides SPY. By the end of 2024, their total AUM was $4.7 trillion.

Explain Like I'm Five

As an investor, pay attention to the AUM of a fund or portfolio manager you're considering.

A huge AUM means a lot of investors—or some very big ones—have trusted their money to this fund or manager, expecting it to grow.

A small AUM might indicate the fund or manager isn't drawing big investments, perhaps because it's niche, new, or losing appeal. You need to research more.

One thing: For an ETF, large AUM shows optimism about the benchmark it tracks, not necessarily the sponsoring company, since most ETFs are passively managed.

How Is AUM Used As a Tool by Investment Companies?

Investment companies use AUM as a marketing tool to draw in new investors. It helps you compare the size of a company's operations against competitors.

What Does AUM Tell Potential Investors?

When you're evaluating a fund, AUM indicates its size. Funds with high AUM usually have higher trading volumes, making them more liquid so you can buy and sell shares easily.

What Is the Benefit of a Fund With a Large AUM?

Funds with large AUM have enough holdings to handle redemption pressures. If a few big investors pull out, the impact is minimal.

The Bottom Line

Assets under management (AUM) is the market value of investments managed by a person or entity for clients. When you evaluate a company or investment, AUM reveals performance and experience. The SEC regulates large-AUM firms to protect investors.